San Ramon Valley school board to issue first round of Measure D bonds

SAN RAMON VALLEY -- Money will start flowing this year from a school facilities bond approved by voters in November.

The school board voted 5-0 Tuesday night to issue the first round of bonds, totaling $74.7 million, that will pay for infrastructure and technology projects at San Ramon Valley schools.

In November, school district voters passed Measure D, a $260 million bond issue. Over the next 20 years, the measure will fund 45 projects in the district, to include seismic upgrades, upgrades to electrical, heating and air-conditioning systems, technology infrastructure upgrades, security cameras, new classrooms, new stadium bleachers at San Ramon Valley and Monte Vista high schools, and a new $31 million elementary school in Dougherty Valley, among other projects.

On Tuesday, the school board looked at three options for financing Measure D, with the first for current interest bonds only and the second and third options allowing for a mix of current interest and capital appreciation bonds.

Current interest bonds, or CIBs, pay interest at regular intervals, and capital appreciation bonds, or CABs, allow districts to defer payments into the future while interest accrues, with repayments later in the term.

CABs have attracted the attention of state legislators because taxpayers in some districts are paying up to 10 times or more than the principal of the bonds over their lifetime.

"I'm not opposed to CABs, but certain districts have made them kind of the poster child for bad financial management," board member Greg Marvel said.

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He said choosing the third financing option, which issues $74.7 million of CIBs this year with the option of issuing CABs later, allows the board to see the lay of the land as state legislators decide whether any action should be taken to restrict CABs.

Marvel said inflation is a concern because it could reduce the future purchasing power of the Measure D bonds, and CABs allow the district to get more money earlier than the CIB-only option.

"In any scenario we have talked about from day one, we have talked about responsible use of CABs," board member Denise Jennison said.

Because of the current political sensitivity around CABs, the board voted to issue only CIBs this year and leave open the option of issuing a mixture of CABs and CIBs over the next six years.

The amount and timing of the issuances under option No. 3 are:

2013: $74.7 million (100 percent CIBs)

2015: $63.2 million (77 percent CIBs, 23 percent CABs)

2017: $61.9 million (53 percent CIBs, 47 percent CABs)

2019: $60.1 million (69 percent CIBs, 31 percent CABs)

Under this option, the total estimated debt service of the bonds will be $513 million over 25 years, rather than $487 million if the board opted only for CIBs. The option adds an average of $24.60 to the property tax bill of homeowners per $100,000 of assessed value until 2042.

Marvel said the third option gives the district 18 months to figure out whether CABs are the way to go for future issuances.

"Basically, with CABs you get slightly more money up front," he said. "We would pay a little more in interest but save in capital construction costs from inflation."